Scrap metal industry struggles

US. While copper shines, scrap metal industry struggles. by Rick Barrett of the Journal Sentinel There are glimmers of hope in the scrap metal industry, an economic bellwether, but the light is still dim. Prices of copper, brass and other metals have shown signs of life after crashing dramatically last fall. For some people, at least, it's a positive sign, as higher metal prices usually mean increased demand and a stronger economy. Higher prices also bode well for metal recyclers who saw their business turn to rust over the winter. Prices of some common ferrous metals fell more than 80% from last summer to early this year. Even prices of exotic metals, such as titanium, plummeted amid lackluster demand. There's been a double curse of low value and not having much to sell, said Marty Forman, president of Forman Metal Co., a Milwaukee metals recycler. "A year ago, we weren't hearing complaints from anyone in our industry. Right now I feel like Muddy Waters singing the blues," Forman said Monday. The glimmers of hope for metal recyclers come as China has bid up prices for raw materials such as copper and aluminum. China imported 748,281 metric tons of refined copper in the first three months of the year, up 92% from the same period a year ago, according to customs data. Copper prices have risen almost half this year, to more than $4,500 a ton. About half the metal used in everything from automobiles to washing machines comes from recycled scrap. "We are clearly going to see higher prices for May," Forman said. "Things aren't going to explode, by any means, but the scuttlebutt is that steel prices are going up $15 to $20 a ton." In the depth of a recession like this, any price increase could be considered a positive sign. "It's better than it was, for sure. There is some built-in optimism about the economy in general," said Bob Garino, director of commodities for the Institute of Scrap Recycling Industries, in Washington, D.C. "The steel industry remains very depressed," Garino added. "And there's uncertainty about how much of the price increases are being driven by real supply-and-demand fundamentals, and how much is strictly from some aggressive Chinese buying." The explosion of developing nations, including China, Russia and India, has changed global demand for raw materials - sometimes resulting in whipsawed prices. Copper prices have surged 49% this year on speculation that demand will rebound as the global economy recovers. Yet prices fell for a third day Monday on speculation that China's appetite for copper may falter. "We expect imports to slow in coming months," Citigroup Inc. analysts led by Alan Heap wrote in a report, saying some Chinese speculative buying may not be sustainable. Prices of common steel, used in highway construction and a plethora of metal products, haven't seen much of a rebound. Certain grades that sold for more than $900 a ton in 2008 slumped to about $150 this winter. "And that was probably the best of it," Forman said. "Prices for some of the lower grades of steel went all the way down to nearly zero. It cost more to haul the stuff than it was worth." A year ago, No. 1 scrap-steel bundles, an industry standard, sold for $675.50 per gross ton in Chicago, according to Scrap Price Bulletin magazine. Monday, the bundles were priced at $210.50 per ton, down 69% from a year before. "A lot of steel prices just went down the drain," Forman said. Years ago, scrap-metal dealers stockpiled material when prices were low - waiting for demand and prices to rebound. Lately, some dealers have stockpiled material because they can't find a buyer. Ladish Co., an aerospace firm in Cudahy, has stockpiled titanium scrap material. Likewise, Forman has a supply of the lightweight, strong metal. "We might get two cents a pound for something that ought to be worth a dollar," he said.